U.S. manufacturing making comeback

Mark Williams, The Columbus Dispatch

Sunday

Jan 29, 2012 at 12:01 AMJan 29, 2012 at 2:51 PM

The jobs are coming home. American companies that shipped work abroad now are starting to bring manufacturing jobs back to this country: Several hundred thousand manufacturing positions are expected to open in the United States in the next decade.

The jobs are coming home.

American companies that shipped work abroad now are starting to bring manufacturing jobs back to this country: Several hundred thousand manufacturing positions are expected to open in the United States in the next decade.

Already, big companies such as Ford and smaller ones such as the maker of EdenPure space heaters have recently returned production to Ohio or say they will.

To make space heaters, Suarez Corp. Industries brought 250 jobs from China to a building in North Canton once used by vacuum-maker Hoover Co.

The company's expansion into other products also has added jobs at other companies that are supplying heater parts.

"This is stupid," EdenPure creator Julius Toth said of making the heaters in Asia. "We need to be manufacturing in America."

Toth estimates that "roughly 1,000 U.S. citizens are paying their bills" now because of the decision to move production back to the U.S. and add jobs.

In recent weeks, though, about half the workers at the North Canton site have been laid off until demand for space heaters picks up in this warm winter.

The shift of some manufacturing jobs back to the U.S. began only recently, but the idea has caught the eye of President Barack Obama, who mentioned it in last week's State of the Union speech.

"So we have a huge opportunity, at this moment, to bring manufacturing back," he said. "But we have to seize it. Tonight, my message to business leaders is simple: Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed."

Business leaders and economists credit the made-in-America-again trend to several factors: rising labor costs in China, increasing costs to ship products to the U.S., and the desire to more directly control the manufacturing process and the quality of the products.

At the same time, the cost of labor in the U.S. is going down, and state and local governments are sweetening the pot by offering tax incentives if companies add or retain jobs in communities.

"While they've been getting more expensive, we've been getting cheaper," said Edward Alden, the Bernard L. Schwartz Senior Fellow at the U.S. Council on Foreign Relations.

Southern states, which don't have a strong labor-union tradition, are more likely to benefit from this trend than Ohio and other parts of the Midwest, said economist Daniel Meges of Cleveland-based Chmura Economics & Analytics.

"I doubt that Mansfield will ever get a Westinghouse-appliance-type operation back, or that GM will reopen their Dayton plant," he said. "The trick will be for smaller, more-nimble manufacturers based in Ohio to work their way into the supply chains of those manufacturing expansions that may take place in those southern U.S. states."

Companies say they can't move manufacturing back to the U.S. just for the sake of doing so.

"We're working hard to just find a long-term business case for bringing that work inside" the U.S., said Marcey Evans, a spokeswoman for Ford, which won state tax incentives in December to bring work from Mexico to a plant in the Cleveland suburb of Avon Lake.

"We can definitely achieve the best costs in this country, as long as we're smart about it," said Jeff Noel, a spokesman for Whirlpool, which makes hand-held mixers in China and is studying whether that work could be shifted to a plant near Dayton. The company, which employs 10,000 in Ohio, notes that about 80 percent of its products sold in the U.S. are made in the U.S.

Who's coming home?

Automakers, electronics companies and cookware manufacturers are among those bringing production back to the U.S. from abroad.

NCR has returned the production of automated teller machines to Georgia from locations abroad. Coleman has said it will start making wheeled plastic coolers in Wichita, Kan., instead of China.

The job total in Ohio could end up being noteworthy:

• Ford said it will move production from Mexico of its F-650 and F-750 trucks to its Avon Lake plant, part of a $128 million investment in the plant that will retain 1,400 jobs. The investment is one of several that Ford is making in the U.S. to return some production from Japan, China, India and Mexico and add 2,300 jobs.

• Appliance maker Whirlpool could add 65 jobs at Greenville, near Dayton, if it decides to shift hand-mixer production there. It has said that production of other small appliances could be returned from China.

• The new owners of Horton Archery have shifted production of archery equipment from China to near Kent in northeastern Ohio. The move will mean about 20 jobs in Ohio, plus other jobs probably at surrounding businesses that supply parts to the company.

The U.S. stands to gain 600,000 to 800,000 manufacturing jobs in the coming decade because of the return of production from abroad, said Harold Sirkin, a partner with Boston Consulting Group, which came out with a study on the issue in October. Total job gains could be 2.3 million to 3.2 million when taking into account the additional construction, transportation and retail jobs that will be needed to support the manufacturing jobs.

The trend is expected to accelerate around 2015, when the cost advantage of producing items in China for sale in North America is expected to diminish to the point where companies will begin to rethink where they make certain goods, he said.

The jobs coming home

Sirkin has identified several sectors that are expected to be most affected by what he calls a " manufacturing renaissance" that accounts for about $2 trillion in U.S. consumption per year and about 70 percent of U.S. imports from China.

The sectors include vehicles and auto parts; household appliances; furniture, plastic and rubber products; and computers and electronics. Sectors such as apparel, footwear and textiles probably will remain abroad.

Some production also will move to Mexico, where labor costs will be cheaper than both China and the U.S., Sirkin's study notes. But even with Mexico, the U.S. will have an edge in many cases by having a larger pool of skilled workers, less crime and fewer security problems than certain parts of Mexico, and customers who are closer to production facilities, the study said.

There is no suggestion that Ohio and the U.S. will recover anything more than a small percentage of the manufacturing jobs lost in the past 20 years, economists say.

U.S. manufacturing employment has been steadily falling since its peak in 1979 at 19.4 million, federal data show. Even with a bump since the recession ended, the number of manufacturing workers has dropped to about 11.8 million workers.

In Ohio, the number had dropped from nearly 1.1 million workers in 1990 to about 640,000 last year, according to state figures.

How many jobs have been lost because companies shifted production abroad is hard to say.

Even if no jobs had been exported, economists say that there would be far fewer manufacturing jobs today than 20 years ago as companies have become more productive with fewer workers. Sirkin notes that U.S. manufacturers have increased productivity by 2.5 times while employing 30 percent fewer workers since 1970.

In some cases, it's not a matter of American manufacturers shutting down plants in China and elsewhere and bringing that production back to the U.S. Instead, some of these foreign plants will continue to operate; it's just that they will serve local or regional markets abroad.

Flexibility, pride

Costs are a big reason for bringing production back home. So are quality issues.

Stephen Graham, marketing director for Horton Archery, said the company's workers also are users of the crossbows they make, and they understand the fine points of the production process that make the equipment more attractive for buyers.

One thing that the company provides buyers is a baseball-card-like picture that shows the worker who made their product and includes the worker's email address in case they have questions.

"All those little touches make a difference," Graham said. "There's a lot more attention to detail. They take pride."

Graham said bringing back manufacturing also means more flexibility and allows quick adjustments if, for example, the company needs to boost production.

"Once it's on the boat, it's hard to turn it around and have something corrected if it's not perfect," he said. "By losing that flexibility, you essentially did lose dollars."

mawilliams@dispatch.com

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